Suppose that the current exchange rate is €1.57 =£1, but it is expected to be €1.45 =£1 in one year. If the curent interest rate on a one-year govemment bond in the United Kingdom is 10%, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in Germany? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds The German interest rate will be % (Round your response to two decimal places)

Suppose that the current exchange rate is €1.57 =£1, but it is expected to be €1.45 =£1 in one year. If the curent interest rate on a one-year govemment bond in the United Kingdom is 10%, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in Germany? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds The German interest rate will be % (Round your response to two decimal places)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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